Maui Land & Pineapple Co. lost $70.6 million in the fourth quarter, almost entirely due to recalibrating its development assets to reflect an expectation of slower sales.
It will sell its Kapalua Plantation Golf Course for $50 million to pay down debt, then ML&P will lease it back and continue to operate the course under the Kapalua brand.
Debt soared following the collapse of Lehman Brothers Holdings Inc. last year, the lead lender for the Residences at Kapalua, in which ML&P is a partner.
The company already had $25 million invested in - that is, tied up in - the Residences, and when Lehman went bankrupt, it added $55 million more to the high-end housing development.
ML&P President Robert Webber said that the company and its partners remain optimistic about eventually selling the 146 multimillion-dollar residences, but they now expect that to take years longer than previously forecast.
"We reduced asset valuations to reflect current market conditions, which could last longer than anyone would like," he said.
Besides the direct investment, ML&P had been increasing its equity in the $370 million project as progress was made in construction. The project, which is on the site of the old Kapalua Bay Hotel, is scheduled for completion in June with the help of partners, such as Marriott International Inc.
Because of the expected delays, the company reduced the value of its assets and took an impairment charge totaling $45.3 million.
It also took a charge of $10.6 million for deferred development costs, which ML&P does not expect to recover. And ML&P reduced the value of its deferred tax assets by $23.6 million.
Some day, if the company returns to profitability, those tax assets could regain value.
These writedowns come to about $78 million, just about the same as the losses for the entire year, which was $79.4 million, or $9.98 per share. The year before, the company reported earnings of $8 million, from land sales, since operating results were negative.
The writedowns include provisions for delays in other built and unbuilt projects, such as Pulelehua employee housing and Kapalua Mauka resort housing.
Webber said the Residences made 10 fractional sales in January and 10 more in February "and in this market, that's a little bit astounding."
The new valuations are meant to reflect stagnant prospects for years into the future, although Webber said he thinks the Residences eventually will sell. They may be the last new oceanfront luxury condominiums available in Hawaii for a long time.
He called the sale of the golf course for cash a "win-win" that allows the company to pay down the unexpected debt it took on as a result of Lehman's withdrawal of financing for the Residences. Last month, final financing was obtained, with Lehman's bankrupt estate providing $35 million and some European banks loaning much of the rest.
Webber said Kapalua resort did better in the last quarter of 2008 than the year before, although it still lost money - $6.6 million in the quarter, primarily because of expenses of running the LPGA Kapalua Classic.
Revenues rose to $8.5 million because of new offerings like the zipline at the Adventure Center and Mountain Outpost.
However, results were depressed because of the general malaise in the visitor industry. But Webber said he believes Kapalua is outperforming competitors in a generally bad business environment.
Operating results were negative in agriculture, but Webber said he thinks they were good enough to keep Maui Pineapple Co. operating. Following huge losses extending over years, the Maui Pine subsidiary was downsized last year, and the board of directors set up a set of "stringent criteria" for it to keep operating.
"We would like to keep it going," he said, and he is cautiously optimistic the directors will agree later this month.
Pine, now limited to fresh sales and canned juice, will never make much money, Webber said, but the company has received "significant concessions" from its workers, made improvements in operations and "we hope the losses are under control."
The agriculture segment had an operating loss of $11.2 million in the last quarter and $30.4 million for the year. In the fourth quarter, revenue was $6.8 million, compared with $10.2 million in the fourth quarter of 2007, when Maui Pine was winding down after closing its cannery for solid pack fruit.
The quarterly and yearly results reported Tuesday were not audited. Webber said the audited report was delayed to allow more time to consider the asset situation and also to assess the impact of drastic cost cutting, including last month's layoffs of 100 workers and 10 percent cutbacks in pay for remaining employees.
Webber said he hopes for a "clean" audit, one without any footnotes questioning the financial assumptions behind management's projections and without the ominous note saying that the auditors doubt the ability of the firm to continue as a concern.
"We believe there will be no problem," he said.
* Harry Eagar can be reached at heagar@mauinews.com.
